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The bad news is raining thick and fast on Red Hat, the dominant Linux distro, what with Oracle last week seeking to undermine its server revenues, and Microsoft today seeking to undermine, its customer base, anointing Novell's SUSE as its Linux distro-in-waiting.

Top executives from Microsoft and Novell convened in San Francisco today to proclaim a landmark deal that sees the companies improve interoperability between Windows and SUSE Enterprise Linux Server (SLES) on virtualization, Microsoft's Active Directory and Novell's eDirectory, and Microsoft Office and OpenOffice XML formats on the desktop.

Microsoft will also promote SLES where customers pick Windows over Linux or decide to run Linux alongside Windows - a move clearly designed to exclude Red Hat from accounts. Microsoft sales staff will distribute 70,000 coupons for SLES.

Furthermore, Microsoft will not prosecute developers and users of SLES over possible infringements of its intellectual property (IP) in SLES. A special Microsoft covenant will cover non-commercial developers and those contributing code to SLES.

At today's conference, Microsoft CEO Steve Ballmer made it clear that Novell is Microsoft's preferred Linux partner. "We want those customers who are coming to Windows and Linux to chose the Novell SUSE product line, and we are going to put our marketing behind that."

Highlighting the importance of the IP covenant to SUSE customers and developers, Microsoft general counsel Brad Smith said: "Novell is the only company in our industry that is able to provide customers with the code to run Linux, the service and support and also the patent covenant from Microsoft."

IP protection is unlikely to be the only factor in the minds of Windows customers when picking Linux, but will be a big plus that pushes them towards SUSE and pulls them away from Red Hat. "As of today, Novell is the only Linux vendor whose tackling interoperability, patent and the other issue that are really important to our customers," Ballmer said.

Faustian pact

Ron Hovsepian, Novell's CEO, apparently called on Microsoft in April by first contacting Microsoft COO Kevin Turner. The price of his Faustian pact? Novell pays an undisclosed royalty to Microsoft amount based on a percentage of revenues until at least 2012 - the deal's expected lifespan. Financial details were not revealed although Hovsepian said Microsoft is putting an "impressive" amount of its own money into the deal. Ballmer sees "upside" for both businesses.

He sidestepped the question of whether Microsoft would consider a similar deal with Red Hat. He said Microsoft had been in discussion with "a number of players in the industry", but "Ron called and had some ideas about what he wanted to with mixed [open and "proprietary"] source." Hovsepian's thinking "dovetails with what we're thinking about," Ballmer said.

The deal will no doubt be welcomed by many for helping open source because it protects developers from the possibility of IP litigation at the hands of Microsoft. Equally, it will dismay many Open Source advocates: Novell is open to the charge that it is protecting its own interests rather than working with others to safeguard the community as a whole from prosecution by big-name IP holders like Microsoft.

With a few exceptions, Microsoft these days wants to be everyone's friends. Red Hat is one of those few exceptions, so for Microsoft the deal with makes perfect sense if only to help out my enemy's enemy. Novell may be a long-time enemy, but new-time enemy Red Hat presents a much more formidable threat.

For Novell, today's deal is quite the turn-around. Microsoft was an unhealthy obsession for Ray Noorda, Novell's longstanding CEO, who frittered hundreds of millions on buying WordPerfect, in a fruitless attempt to take the fight to the company to the desktops.

Novell's glory days are long gone, and its new new thing, basing a Linux business around SuSE, acquired in 2003, has not taken wing. It would not surprise us if Microsoft is better than Novell at selling SUSE software. ®